The Australian Taxation Office's Use of Data Matching and Analytics in Tax Administation

150 Pages·2008·1.62 MB·English

T h e A u d i t o r - G e n e r a l
Audit Report No.30 2007–08
Performance Audit
The Australian Taxation Office’s Use of Data
Matching and Analytics in Tax Administration
Australian Taxation Office
A u s t r a l i a n N a t i o n a l A u d i t O f f i c e
© Commonwealth
of Australia 2008

ISSN 1036–7632

ISBN 0 642 81011 7

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ANAO Audit Report No.30 2007–08
The Australian Taxation Office’s Use of Data Matching and Analytics in Tax Administration

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Canberra ACT
24 April 2008

Dear Mr President
Dear Mr Speaker

The Australian National Audit Office has undertaken a performance audit in the
Australian Taxation Office in accordance with the authority contained in the
Auditor-General Act 1997. Pursuant to Senate Standing Order 166 relating to
the presentation of documents when the Senate is not sitting, I present the
report of this audit and the accompanying brochure. The report is titled The
Australian Taxation Office’s Use of Data Matching and Analytics in Tax
Administration.

Following its presentation and receipt, the report will be placed on the
Australian National Audit Office’s Homepage—http://www.anao.gov.au.

Yours sincerely

Ian McPhee
Auditor-General

The Honourable the President of the Senate
The Honourable the Speaker of the House of Representatives
Parliament House
Canberra ACT

ANAO Audit Report No.30 2007–08
The Australian Taxation Office’s Use of Data Matching and Analytics in Tax Administration

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AUDITING FOR AUSTRALIA

The Auditor-General is head of the
Australian National Audit Office. The
ANAO assists the Auditor-General to
carry out his duties under the
Auditor-General Act 1997 to undertake
performance audits and financial
statement audits of Commonwealth
public sector bodies and to provide
independent reports and advice for
the Parliament, the Government and
the community. The aim is to improve
Commonwealth public sector
administration and accountability.

For further information contact:
The Publications Manager
Australian National Audit Office
GPO Box 707
Canberra ACT 2601

Telephone: [phone]
Fax: [phone]
Email: [email protected]

ANAO audit reports and information
about the ANAO are available at our
internet address:

http://www.anao.gov.au

Audit Team
David Crossley
Richard Mackey
Kirsty Stuart
Budi Cahyono

(cid:561)

ANAO Audit Report No.30 2007–08
The Australian Taxation Office’s Use of Data Matching and Analytics in Tax Administration

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Contents
Abbreviations..................................................................................................................8
Summary and Recommendations............................................................................11
Summary......................................................................................................................13
Introduction.............................................................................................................13
Audit objective and scope.......................................................................................16
Conclusion..............................................................................................................17
Key findings by chapter...........................................................................................20
Recommendations..................................................................................................26
Summary of agency response................................................................................27
Recommendations.......................................................................................................28
Audit Findings and Conclusions..............................................................................31
1. Background and Context........................................................................................33
The Australian Taxation Office................................................................................33
Data matching.........................................................................................................33
Data matching in the Tax Office..............................................................................34
Recent developments.............................................................................................39
Audit overview.........................................................................................................46
2. Legislative and Policy Framework..........................................................................50
Authority for data matching.....................................................................................50
Compliance with privacy requirements...................................................................52
3. Data matching and analytics capability in the Tax Office.......................................57
Introduction.............................................................................................................57
A Tax Office capability............................................................................................57
Data matching and analytics: administrative framework.........................................61
Data matching and analytics: methodologies.........................................................63
Data acquisition and quality....................................................................................79
Pre-filling income tax returns..................................................................................82
Optimising the potential of data matching and analytics.........................................86
4. Governance and Coordination Arrangements........................................................94
Introduction.............................................................................................................94
Management of the data matching and analytics capability...................................94
Performance monitoring and reporting...................................................................96
Guidance to Tax Office staff.................................................................................105
Emerging issues....................................................................................................106

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The Australian Taxation Office’s Use of Data Matching and Analytics in Tax Administration

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Appendices...............................................................................................................109
Appendix 1: Agency Response............................................................................111
Appendix 2: Authority for acquisition of data........................................................114
Provided data........................................................................................................114
Legislated data......................................................................................................118
Memorandum of understanding data....................................................................121
Purchased data.....................................................................................................121
Datasets the Tax Office requisitioned on an ad hoc basis for data matching
projects.............................................................................................................122
Appendix 3: Tax Office’s data mining, modelling, mapping and analytics
projects.............................................................................................133
Glossary.....................................................................................................................137
Index...........................................................................................................................143
Series Titles................................................................................................................145
Current Better Practice Guides..................................................................................148

Tables
Table 1 Tax Office submissions to the Privacy Commissioner, 2003–04
to 2006–07..........................................................................................21
Table 2 Automated data matching using Annual Investment Income
Report (AIIR) and Dividend and Interest Schedule data, Pay-As-
You-Go (PAYG) data (e.g. salary, lump sums, fringe benefits),
Centrelink data (e.g. various benefits and allowances, pensions),
and Medicare Australia data (e.g. private health insurance
premiums, Medicare levy surcharge data).........................................25
Table 2.1 Tax Office submissions to the Privacy Commissioner, 2003–04
to 2006–07..........................................................................................53
Table 3.1 Automated data matching using legislated data sources...................71
Table 3.2 Data matching using data on foreign sourced income.......................72
Table 3.3 Administrative matching of purchased data to update client
registers..............................................................................................76
Table 3.4 Data matching projects using requisitioned data...............................77
Table 4.1 Results of the legal profession project...............................................98
Table A 1 (a) Data provided to the Tax Office by taxpayers or their tax agents....114
Table A 1 (b) Supplementary data provided to the Tax Office by taxpayers or
their tax agents.................................................................................115
Table A 2 Legislated datasets the Tax Office receives regularly, and the
legislation under which the data is provided.....................................118
Table A 3 Datasets acquired through a memorandum of understanding.........121
Table A 4 Datasets the Tax Office purchases..................................................121
Table A 5 Tax Office’s gazetted data matching projects 2000–07...................122
Table A 6 Analytics projects 2005 to 2007.......................................................134

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Figures
Figure 1.1 Categories of data..............................................................................36
Figure 2.1 Tax Office and federal government agency submissions to the
Privacy Commissioner, 2003–04 to 2006–07.....................................55
Figure 3.1 Tax Office’s compliance model..........................................................62
Figure 3.2 Tax Office data matching and analytics capability.............................65
Figure 4.1 Lodgement of lawyers income tax returns..........................................99
Figure 4.2 Legal Profession voluntary compliance in debt and lodgement of
income tax returns............................................................................100

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Abbreviations
ABN(cid:561) Australian(cid:561)Business(cid:561)Number(cid:561)
AIIR(cid:561) Annual(cid:561)Investment(cid:561)Income(cid:561)Reports(cid:561)
AML/CTF(cid:561) Anti(cid:556)Money(cid:561)Laundering(cid:561)and(cid:561)Counter(cid:556)Terrorism(cid:561)Financing(cid:561)
ANAO(cid:561) Australian(cid:561)National(cid:561)Audit(cid:561)Office(cid:561)
ASIC(cid:561) Australian(cid:561)Securities(cid:561)and(cid:561)Investments(cid:561)Commission(cid:561)
ATOms(cid:561) Australian(cid:561)Taxation(cid:561)Office(cid:561)matching(cid:561)system(cid:561)
ATRO(cid:561) Australian(cid:561)Taxation(cid:561)and(cid:561)Revenue(cid:561)Offices(cid:561)
AUSTRAC(cid:561) Australian(cid:561)Transaction(cid:561)Reports(cid:561)and(cid:561)Analysis(cid:561)Centre(cid:561)
CGT(cid:561) Capital(cid:561)Gains(cid:561)Tax(cid:561)
CKO(cid:561) Chief(cid:561)Knowledge(cid:561)Officer(cid:561)
COAG(cid:561) Council(cid:561)of(cid:561)Australian(cid:561)Governments(cid:561)
DMSC(cid:561) Data(cid:561)Matching(cid:561)Steering(cid:561)Committee(cid:561)
ECI(cid:561) Electronic(cid:561)Commerce(cid:561)Interface(cid:561)
ECMP(cid:561) Easier,(cid:561)Cheaper(cid:561)and(cid:561)More(cid:561)Personalised(cid:561)
EDW(cid:561) Enterprise(cid:561)Data(cid:561)Warehouse(cid:561)
GST(cid:561) Goods(cid:561)and(cid:561)Services(cid:561)Tax(cid:561)
HECS/SFSS(cid:561) Higher(cid:561)Education(cid:561)Contribution(cid:561)Scheme/Student(cid:561)Financial(cid:561)
Supplement(cid:561)Scheme(cid:561)
HOTSA(cid:561) Health(cid:561)of(cid:561)the(cid:561)System(cid:561)Assessment(cid:561)
ICP(cid:561) Integrated(cid:561)Core(cid:561)Processing(cid:561)

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ITAA(cid:561) Income(cid:561)Tax(cid:561)Assessment(cid:561)Act(cid:561)
ME&I(cid:561) Micro(cid:561)Enterprises(cid:561)and(cid:561)Individuals(cid:561)
OCKO(cid:561) Office(cid:561)of(cid:561)the(cid:561)Chief(cid:561)Knowledge(cid:561)Officer(cid:561)
OECD(cid:561) Organisation(cid:561)for(cid:561)Economic(cid:561)Co(cid:556)operation(cid:561)and(cid:561)Development(cid:561)
PAYG(cid:561) Pay(cid:561)As(cid:561)You(cid:561)Go(cid:561)
RFT(cid:561) Request(cid:561)for(cid:561)Tender(cid:561)
Tax(cid:561)Office(cid:561) Australian(cid:561)Taxation(cid:561)Office(cid:561)
TFN(cid:561) Tax(cid:561)File(cid:561)Number(cid:561)
(cid:561)
(cid:561)
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